Home Health Stocks Fell Before HHGM Decision

By Tim Regan | November 13, 2017

Home health stocks dipped in October as the industry braced for the then-forthcoming home health groupings model (HHGM) decision, according to the Home Health Index November update from M&A advisory firm Stoneridge Partners.

The decision ultimately fell in favor of the home health industry. The Centers for Medicare & Medicaid Services (CMS) released its final rule on Nov. 1 for the home health prospective payment system (PPS) 2018 update without finalizing HHGM.

Many public home health companies’ stocks shot up in the wake of the news.

Before that, however, some investors seemed anxious over the looming HHGM and its potential for disrupting the home health payment system. The market value of the three largest publicly traded home health companies dipped 11.73% in October, according to the latest Index. In contrast, the S&P 500 rose 2.23% that month.

Addus HomeCare (Nasdaq: ADUS), which is not included in the index because so little of its income comes from Medicare, saw no change in its share value in October.

“The big news here is what happened with HHGM,” said Stoneridge President Rich Tinsley. “That should overshadow many of the month’s losses. Investors can be confident HHGM is off the table for the immediate future.”

October’s jolt was the latest in a regulatory roller coaster for home health share prices. Stocks fell sharply in July on reactions to the HHGM before rebounding again in the months that followed.

And although investors seem much more confident with November’s decision, CMS hasn’t ruled out bringing HHGM back at a later date. The agency is still considering a good portion of the more than 1,300 public comments that were left on the Federal Register.

Some in the industry want to be more engaged in the process of developing a new and modernized payment system, such as April Anthony, CEO of Encompass Home Health. Encompass is the home health care branch of HealthSouth Corporation (NYSE: HLS).

“Throughout the process we acknowledged that we would be in support of changes that moved payments from volume to value and we’re open to pursue such changes in collaboration with CMS,” Anthony told HHCN earlier this month. “We are prepared to begin this effort immediately and have already reached out to CMS representatives to inform them of our willingness to engage in that process as soon as they are ready to do so.”